Consumer Commitment Anxiety
September 2013

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Recent developments suggest that people—in particular, young people—are becoming wary of long-term financial commitment. Getting young consumers to commit to large purchases is becoming increasingly challenging. Prepurchase trial periods that enable people to try a product, a service, or even a way of life before committing fully to it are becoming more popular.

Recent developments suggest that people—in particular, young people—are becoming wary of long-term financial commitment. Prepurchase trial periods that enable people to try a product, a service, or even a way of life before committing fully to it are becoming more popular. Some segments of society are shunning ownership and actively seeking out options that increase their flexibility and personal freedom.

Shunning ownership is becoming a way of life for an increasing number of people for a number of reasons.

Getting young consumers to commit to large purchases—such as homes or cars—is becoming increasingly challenging. In the United States, some young people are trying to avoid making purchases when renting is an option. Anxiety about the future underpins this trend. Many young people have a large amount of student-loan debt and lack the jobs or salaries necessary to buy homes and cars. This rental generation views ownership not only as expensive but also as constraining. Members of this segment do not want to settle down and buy a house because they may need to move suddenly to pursue a job opportunity. In addition, technology is making renting easier and ownership less necessary. The Consumer Financial Protection Bureau (Washington, DC) found that "20- to 34-year-olds are renting apartments, cars, and even clothing to save money and stay flexible" ("The Rental Generation Sees No Point in Buying," Bloomberg Businessweek, 9 August 2012; online). According to a study by the John J. Heldrich Center for Workforce Development at Rutgers University (New Brunswick and Piscataway, New Jersey), the median starting salary for students who graduated between 2009 and 2011 was $27 000 in May 2012, which is about $3000 less than it was in 2007. A similar situation exists in Japan. According to Takao Komine, a professor at the Graduate School of Regional Policy Design at Hosei University (Tokyo, Japan), Japanese people in their twenties and thirties account for about 40% of the working-age population but often abstain from high-level consumption. Furthermore, some people in this group are questioning whether owning cars and houses is necessary. Recent data suggest that the economic malaise that has been ongoing in Japan since the early 1990s has exacted a toll that has affected generation after generation. Today, only half of working people between the ages of 15 and 24 hold regular jobs; some 40% are so-called nonregulars who take on a variety of low-paying temporary jobs. The financial insecurity of this generation hinders consumption and professional development. "Over the past 20 years, as the share of nonregulars in the Japanese workforce has nearly doubled, Japan's productivity has barely improved. A growing body of research links these two developments" ("What Americans Should Understand About Japan's 1990s Economic Bust," Atlantic, 24 April 2013; online). Ethan Devine, a partner at Indus Capital Partners (New York, New York), perceives parallels between the economy in Japan in the 1990s and the economy in the United States today. Devine also hints that the US economy could follow a development path similar to that of the Japanese economy in years to come. The economies of many countries in Europe could do the same.

This increasing popularity of trials has implications beyond consumer behavior. Some services provide people with life experiences. In 2010, social entrepreneur Atsuko Horie started an initiative in Japan that enables college students to connect with families that require support for domestic household chores and child rearing. Essentially, this program gives young people the opportunity to experience what trying to balance their professional and personal lives is like. Crucially, it provides young people of a generation that appears to lack confidence in the future with a way to experience family life before they decide to start families themselves.

Cash-strapped middle-class consumers in developed economies are still interested in luxury goods, but many consumers now experience luxury via affordable, no-commitment packages. Enterprise Rent-A-Car (Clayton, Missouri), a vehicle-rental company that usually concentrates on the low end of the market, has expanded its Exotic Car Collection. The company's Exotic Car Collection network now covers 13 locations across six US states. "Even customers who typically rent a budget-mobile will sometimes splurge for a birthday or anniversary trip.... Spending $1,000 for a Porsche may satisfy a bucket-list fantasy" ("The Rise of the Rent-a-Porsche," Wall Street Journal, 13 February 2013; online). Experience can also play an important role in the process of making a decision about the purchase of a luxury product. Indeed, some Japanese consumers are paying for product trials—especially for consumer robots, rice cookers, and other high-end products—before they commit to making a purchase. Services involving luxury cosmetic products are also proving popular in Japan. For about $32 per month, GlossyBox (www.glossybox.com) will deliver a box containing four or five trial-size cosmetic products to a customer. This service provides customers with access to high-end products at a reduced rate.

Of course, the idea of providing experiences as a primary business model is not new. Scan™ first discussed the emergence of the experience economy in the early 1990s. In 2009, Scan discussed how the global economic recession and the expanding reach of networking technologies could enable consumers to share in the ownership and use of a wide range of products. Since then, some consumer segments have indeed started to abandon ownership and embrace collaborative consumption. Certainly, people are becoming used to sharing goods and services. Collaborative consumption has now become such a popular concept that a large German computer expo (CeBIT 2013) used an analogous term—The Shareconomy—as its motto. Dieter Kempf, president of Bitkom (Germany's Federal Association for Information Technology, Telecommunications and New Media; Berlin, Germany), claims that the shareconomy already exists. Kempf backed up his claim using the results of a recent Bitkom survey. Some of this survey's findings were perhaps unremarkable—for example, that 83% of 14- to 29-year-olds already share digital products such as photos and videos is especially unsurprising. (Arguably, sharing digital products is not even sharing because digital copies enable users to own their own version.) However, other data from this survey were much more intriguing and suggest changes in consumer behavior. In particular, a surprisingly high 17% of survey respondents claimed to share apartments and physical objects such as cars and tools using the internet as a mediator.

Shunning ownership is becoming a way of life for an increasing number of consumers for a number of reasons, and many implications exist for businesses and governments. For centuries, increasing ownership of goods has driven economic growth. The purchase of products provides revenues for companies and taxes for governments. Many organizations have based their business models on the simple premise that people will always want to buy and own products. This premise may no longer hold true, and consumers' shift from buying products to buying services that provide associated experiences might be more fundamental than companies previously expected. Although companies have the opportunity to broaden the range of products that consumers can rent, making such a shift may prove tricky in some sectors.

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